Friday Jul 24, 2026
Friday Jul 24, 2026
Friday, 24 July 2026 00:00 - - {{hitsCtrl.values.hits}}
Finance and Planning Deputy Minister Dr. Anil Jayantha Fernando
The Government is preparing to restore criminal sanctions for serious foreign exchange offences after investigations into approximately $ 715 million remitted overseas through fraudulent import transactions exposed a gap in Sri Lanka’s legal framework.
Finance and Planning Deputy Minister Dr. Anil Jayantha Fernando told Parliament yesterday that the Government intends to present a Cabinet paper to amend the Foreign Exchange Act, No. 12 of 2017. The move seeks to reclassify non-compliance in remitting foreign exchange as a criminal offence rather than a civil one subject only to fines.
Earlier this week, officials from the Central Bank of Sri Lanka (CBSL) told Parliament’s Committee on Public Finance (CoPF) that discussions with the Finance Ministry were underway to amend the Foreign Exchange Act to once again make serious foreign exchange offences criminal, allowing law enforcement agencies to prosecute fraudulent advance payment transactions directly.
The proposal follows the Criminal Investigation Department’s (CID) investigation into approximately $ 715 million transferred overseas between January 2023 and March 2026 through 105 shell companies using import documentation that did not result in actual goods brought into Sri Lanka.
The CID has identified 55 individuals, 227 bank accounts, and approximately 24,300 telegraphic transfers (TTs) processed through 13 State and private banks as part of the alleged scheme.
Investigators have also uncovered alleged collusion involving banking officials and linked part of the network to international money laundering operations involving Dubai-based drug traffickers.
Investigators told the CoPF that one suspect allegedly controlled 43 companies responsible for transferring about $ 43 million overseas. Two suspects were extradited from Dubai with Interpol assistance and have been remanded as investigations continue.
CBSL officials said the case had highlighted a significant weakness created when the Exchange Control Act was repealed in 2017 and replaced by the Foreign Exchange Act. Customs officials told court that it was likely that trade-related money laundering took off since the Exchange Control Act was repealed.
They said the previous Exchange Control Act treated foreign exchange violations as criminal offences, enabling direct investigation and prosecution. The Foreign Exchange Act shifted Sri Lanka’s foreign exchange framework from restrictive exchange controls towards facilitating legitimate cross-border transactions, retaining administrative and civil penalties while removing criminal liability.
As a result, officials said investigators examining fraudulent advance payment transactions have been unable to prosecute the foreign exchange violations themselves. Instead, they have had to establish links to separate offences such as money laundering, organised crime, or narcotics trafficking before criminal proceedings could be initiated.
CID officials said the anti-money laundering framework lists offences under the Foreign Exchange Act, but foreign exchange violations no longer constitute predicate offences in the manner they did under the former Exchange Control Act.
CoPF Chairman MP Dr. Harsha de Silva said the legal position had complicated criminal investigations.
“So the CID has a problem. They cannot investigate and prosecute,” Dr. de Silva observed during the proceedings.
CBSL officials said the proposed amendments would restore criminal liability only for serious foreign exchange offences involving fraud, false documentation, and deliberate abuse of the system, including fraudulent advance payments for imports that never materialise.
They stressed that the changes would not reverse the liberalisation of Sri Lanka’s foreign exchange regime. Procedural and administrative breaches would continue to attract civil sanctions, while criminal penalties would be reserved for serious offences.
Officials said restoring criminal sanctions would enable law enforcement agencies to investigate and prosecute fraudulent foreign exchange transactions directly rather than relying on associated criminal offences to establish jurisdiction.
